1.4 Preguntas directrices
2.1.3 Enfoques sobre competencias profesionales del docente
Farmers pension and disability system was formed in 1990, when it was separated from the ZUS insurance system. It is represented by the Agricultural Social Insurance Fund (KRUS), which consists of 5 funds. One of them, Pension and Disability Fund (FER) was established for pension and disability resources and payments. The fund covered around 1.6 m of insured persons and beneficiaries in the base year. Both figures started decreasing in recent years, as depicted in Figure 42:
Figure 42: Number of insured persons and beneficiaries in FER, years 1991-2009
Source: KRUS website
Pension and disability contributions for farmers are paid quarterly, as a lump sum fixed at the
level of 30%58 of monthly farmer’s pension. It amounted to PLN 179 in the base year.
Farmer’s pension was also a monthly lump sum at the level of PLN 597 in 2007. The consequence of significant disproportion between small amounts of paid contributions and much higher pensions and disability benefits is the high deficit of FER: its main source of revenues are current transfers from the state budget, which cover around 93% of all
revenues, and only 6% comes from the contributions paid by farmers59. However, it cannot
be neglected that the deficit also results from the decreasing participation rates of younger cohorts in KRUS. Simply speaking, year by year fewer young persons choose to enter the farming sector. As a result, a decreasing number of contributors enter the KRUS-system. Hence, not only demographics and the benefit/contribution structure play a role in the financing of KRUS but also cohort specific participation rates. We shall come back later to this aspect. FER expenditures are mainly spent on pension and disability benefits. Some part of the state budget transfers for FER are redirected to the National Health Fund as substitute
58 Amounting currently (June 2010) to 10% of basic farmer’s pension.
59 Recently introduced reform, which aims at increase in contributions inflow from bigger and wealthier farms was
not reflected in the computations due to lack of data. Starting from IVth q2009, farmers, who own over 50 hectares (around 123 acres) of field, pay additional monthly contributions – progressing in accordance with growing area of owned land. Recent figure, which take into account the first effects of mentioned contribution raise suggest that pension and disability contributions may be even doubled (Ist q2010).
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of farmers’ health contributions. According to our assumptions on isolation, as in the case of ZUS, here we do not take into account other types of fiscal burdens paid by farmers to the state and local budgets (VAT, PIT, rural tax) or to the social insurance system (e.g. in the case of additional insurance in ZUS). Certainly, part of them, due to the decision of the state or local government on allocation of transfers is paid back to farmers. However, the amount of government support does not stand in direct relation with the amount of pension and
disability entitlement of an individual60.
Statutory retirement age for men is 65 and 60 for women. Though there are possibilities to retire earlier, by five years respectively, comparing to the general FUS system, both men and women insured in KRUS in principle tend to work (and contribute to KRUS) until the statutory retirement age.
Pension scheme for farmers is a typical unfunded defined benefit scheme. There is no correspondence between amounts of paid contributions and level of benefits. Pension benefits are paid as a lump sum, based on the criterion of sufficient number of contributory years in farmers’ scheme – 25 years for both men and women.
4.3.1. Computation procedure for farmers’ pensions, disability, and
survivors’ benefits
The input data for the amounts of farmers’ pension and disability contributions were provided upon request by the Farmers’ Social Insurance Fund, in 6-year long, unisex cohorts. The extended, gender-specific profile was based on own calculations with the use of Demographic Yearbook of Poland (2008, CSO). Data on the number of contributors were unavailable for the base year, so the original profile was divided per capita with nominal amounts of annual contributions (four times quarterly contributions per insured person), which roughly satisfied the aggregated annual inflow of farmers’ pension and disability contributions.
The contribution side was developed according to the probabilities derived from the micro- profile. The method of computation of the expenditures side of generational accounts for farmers (pensions, disability benefits and survivors’ benefits) is similar to ZUS disability and survivors’ benefits. On the basis of micro-profiles, provided upon request by the KRUS, the
probability to become a beneficiary-farmer for newcomers was tackled separately61. Micro
profiles for existing beneficiaries as well as the newcomers were estimated on the basis of age and sex specific expenditures for single year cohorts and weighted with the population size.
However, comparing with the other types of GA calculations one important change has been introduced to the new pensioners’ profile. Due to the observed process of outflow of farmers from the farming sector (here elaborated on the basis of the pace of a decreasing number of persons insured in KRUS in years 2000-2007, as shown in Figure 42), we decided to introduce a modification into the number of newcomers to the pension system each year. According to our assumption, which in principle follows the assumptions of the expertise
60 In this respect our results do not stand in opposition to results of Soszyski (2009), who considers all fiscal
revenues paid by farmers (e.g. VAT) and transfers received, as we consider only social contributions and all transfers received. The difference in interpretations and conclusions may stem from the different methodological approach.
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made by IAFE-NRI62 (2009) – illustrated in further detail in Figure 43 – the number of
persons insured in KRUS shall fall from 1.6 m63 in the base year to roughly 630,000 in
2050.64
Figure 43: Projection of participation rates in KRUS pension system
Source: own calculations
In consequence we show two options: 1) the standard or the outflow scenario in which we
assume an outflow of farmers across coming decades and 2) the non-outflow scenario in
which the age-specific probabilities to be an insured person and a beneficiary in the base year remains unchanged in the future. Depending on the version, the ZUS pension fund was adjusted accordingly. In other words the outflow of farmers corresponds to an equal inflow to ZUS. Expected development of cash flows in both scenarios is plotted in Figure 44. It is interesting what a huge impact the outflow of insured persons has on the cash deficit of the fund – which gives yet more evidence of the ‘devastating’ effect of generous benefit formulas of the old type of social insurance system on the solvency of the social scheme. Even in the outflow scenario large disproportions between contributions and benefits can be spotted.
62Instrumenty oddziaływania Pastwa na kształtowanie struktury obszarowej gospodarstw rolnych w Polsce; rola
systemu ubezpieczenia społecznego rolników w kształtowaniu tej struktury. Stan obecny i rekomendacje na przyszło oraz propozycje nowych rozwiza dotyczcych tego obszaru dla systemu ubezpiecze rolników; expertise LED by A. Sikorska for the Ministry of Agriculture and Rural Development, Institute of Agricultural and Food Economics - National Research Institute (IAFE-NRI), 2009.
63 KRUS website.
64 This drop by 60 % can be partially explained by the decline of the working population in the coming decades.
From 2007 to 2050 the overall size of the age groups 20 to 60 will shrink by roughly 35 %. The residual can be traced back to the drop of the participation rates in the farming sector and respectively in KRUS. We define this participation rate here more precisely as the ratio of overall insured in KRUS (whether pensioners or contributors) to the overall population – of the respective age groups. While this participation rate amounted to an average of roughly 8 % for the age groups 20 to 60 in 2007, we assume that it will shrink to about 5 % in 2050 – see Figure 43.
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Figure 44: Development of FER revenues and expenditures. Scenarios with outflow and no- outflow, (g=1.5, r=0), 2007
Source: own calculations
4.3.2. Generational Accounts, Fiscal Gaps and Sustainability Indicators
for farmers’ social benefits system
The GAs for farmers’ pension and disability scheme, plotted in Figure 45
,
give a rathernegative impression. Its shape reminds the ZUS pension no-1999-reform scenario. In fact, due to quite comparable benefit formula and additional deep underfunding, it shouldn’t be a surprise. In the case of expected outflow of younger cohorts to the ZUS system, the GAs give a better economic prospect – the younger the cohorts are, the better off they become (or rather less badly-off) in terms of sustainability gap. The reason is clear, a smaller proportion of the population is participating in the unsustainable KRUS pension system – see Figure 43. As a consequence GAs shrink in absolute terms for younger cohorts. For already retired farmers, however, the outflow of younger cohorts has no influence. Their participation rate is constant in the outflow scenario.
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Figure 45: Generational Accounts for farmers’ pension and disability fund, 2007
Source: own calculations
As a second indicator we examine the sustainability gap. There are also two scenarios: one
for the outflow or standard scenario and second for no-outflow. In the latter scenario the
sustainability gap would amount to roughly 60% of GDP. With the outflow of farmers encouraged by higher average pensions to be expected from NDC/FDC, the fiscal gap would fall to 48% of GDP. Compared to other already analyzed isolated systems of ZUS, ‘weighted’ with their base year absolute amounts of expenditures, which are two or three times higher, the isolated farmers’ fund without government support induces a huge sustainability gap.
Figure 46: Sustainability gap for farmers’ pension and disability fund, 2007, % of GDP
Source: own calculations
The next indicator, the FGB gives comparable impression to the previous one: depending on the magnitude of expected ‘migration’ of farmers to ZUS, the FGB indicates a considerable additional burden for future generations. A `theoretical´ newborn of 2008 would have to pay respectively ca. PLN 38,000 or PLN 47,000 more than his 2007 counterpart, depending on
-20,0 -18,0 -16,0 -14,0 -12,0 -10,0 -8,0 -6,0 -4,0 -2,0 0,0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 in 1 00 0 P L N Age
standard scenario (with outflow) non-outflow scenario
47,5 59,6 0 10 20 30 40 50 60 70
standard scenario (with outflow) non-outflow scenario
in % o f G D P
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the intensity of the outflow of contributors to the NDC scheme. Whatever scenario is taken as preferred, the isolated farmers’ pension and disability fund is not sustainable.
Figure 47: FGB for farmers’ pension and disability fund, 2007
Source: own calculations -30,0 -20,0 -10,0 0,0 10,0 20,0 30,0 40,0 50,0 -1 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 in 1 00 0 P LN age
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